MONTH AFTER MELTDOWN, INDUSTRY REELING.

Byline: GREGORY J. WILCOX

Monday is the one-month anniversary of Meltdown Friday, the day Calabasas-based Countrywide Financial Corp. took a big hit, the day the mortgage business as we knew it ceased to exist.

Call it a credit crunch or a liquidity crisis if you wish.

The fact is, investors in mortgage-backed securities stopped buying them, and the home-loan industry is still feeling the aftershocks.

Countrywide's meltdown is reminiscent of the one that hit Lockheed Corp. in the early 1990s. The Cold War ended, defense spending plummeted, and Lockheed eventually moved out of California -- selling its building to Countrywide for $33 million.

In the past month, Countrywide Chairman and CEO Angelo Mozilo has ordered lending standards tightened and arranged for $25.5 billion in financing to keep the business going.

He has also said as many as 12,000 jobs will be eliminated.

Despite investors' skepticism of mortgage-backed securities, the tool remains critical to today's global economy.

In the early 1970s, Louis Ranieri -- considered the father of mortgage securities -- and colleague Bill Simon, who would later become treasury secretary, were putting together a market in these instruments at Solomon Brothers.

The Government National Mortgage Association (Ginnie Mae) bought into that idea and brought the securities to market. It took a while for the idea to catch on, but today it's huge.

The securities keep cash flow going in the mortgage market, and they circulate around the world.

Big lenders, such as Countrywide, pool my home loan, your home loan and lots of others, then sell the package to investors. They include pension funds, hedge funds, insurance companies, investment banks and foreign entities.

So while you and I keep making our monthly mortgage payments, the Countrywides of the world don't wait 30 years or however long to get their money back. They get it back from the investors who buy the loan package.

And the loan cycle begins anew.

On Meltdown Friday, that cycle broke.

Scrambling ensued.

John Karevoll, an analyst at DataQuick Information Systems in La Jolla, said Aug. 17 was a Countrywide day, for sure.

The market was continuing to take Freddie Mac- and Fannie Mae-guaranteed loans, which are capped at $417,000.

But lots of the loans made by Countrywide were jumbo loans because the houses cost more than the Fannie and Freddie limit.

"Investors that were buying them said they were no longer buying them," he said of Countrywide's loans.

Keith Gumbinger, vice president of mortgage tracker HSH Associates in Pompton Plains, N.J., calls that day a fracture point.

"There is a trust issue going on between the buyer and seller," he said.

In other words, those on the buying side are sort of saying to the sellers, "We're not sure about your MBS (mortgage-backed securites) anymore."

No one knows how long this standoff will continue, either.

"It's stopped getting worse," Gumbinger said.

"It would be premature to say there has been any measure of improvement. But we have stabilized."

We'll see if this week brings anymore bad news.

[e-mail]

[phone]